Thin Asians and Fat Americans

Thin Asians and Fat Americans crowded into Disneyland last Thursday, along with your editor and his conspicuously lean family. Each of us ponied up $76 apiece to enter the "Happiest Place on Earth." The food was not included, of course…But that did not prevent either the thin Asians or the fat Americans from consuming lots of it.

In one particular eatery, we observed a diverse crowd of "thins" and "fats" chowing down the identical fat-laden grub. As your editor surveyed this scene, he imagined he was witnessing an epic shift in global consumption trends – a shift from West to East.

Even if we Americans tried to stuff more junk into our over-stuffed bodies and homes, we could not possibly keep up with the Chinese. Since the Chinese outnumber us four-to-one, and since the Chinese economy is growing more than twice as fast as ours, the Asian nation is certain to overtake U.S. demand for many of the world’s resources.

As present, Americans represent only 5% of the world’s population, but consume 26% of its resources. Purveyors of consumption, therefore, have prospered handsomely in the America of the last forty years – McDonalds and Disneyland being two notable examples. But we would expect the next forty years to belong to the purveyors of consumption in China.

"Disneyland, like so much of America, is about consuming more than we need," observes Joel Beers in a witty "OC Weekly" column. "Anywhere in America is a perfect place to view the chunky, plump, rotund, stout and robust. But there are few places where you can witness the truly elephantine, corpulent, distended and gargantuan. Disneyland is one of them. Anyone who has hung out at the park can attest to this fact: fat people are all over Walt Disney’s bucolic division of long-lost America."

Disneyland, of course, does not discriminate against any guests, regardless of their nationality or socio-economic standing or weight or cholesterol count. To the contrary, Beers believes, the park actually attracts a disproportionately large percent of disproportionately large tourists. The reason, he theorizes, is that the implicit biases of the classic Disney stories project a fat-friendly ethos.

"The happiest of the Seven Dwarfs is, duh, Happy. He’s also the fattest," Beers writes. "The skinniest of the dwarfs is Dopey. He’s also borderline retarded. Few Disney villains are as dastardly as the dog-napping Cruella De Vil or the terrible witch in Sleeping Beauty. They’re also emaciated anorexics. Meanwhile, few characters are as lovable as the Jungle Book’s Baloo, Dumbo or that honey-guzzling, potbellied Pooh Bear named Winnie. Clearly, in Walt Disney’s wonderful world of imagination, thin is evil and manipulative…Fat and lumpy, meanwhile, is lovable warm goodness incarnate."

When Disneyland opened for business in the summer of 1955, it featured 19 attractions and a family of four could walk in for less than five-dollar bill. The present-day Disneyland features many more attractions and costs about 60 times more money to visit.

"But one thing," Beers relates, "has stayed eerily consistent: the grub. Although the original park has expanded greatly, there are still only six more places to eat. And the food offered in 1955 is still, by and large, the food offered now: hot dogs, hamburgers, fries, candy, ice cream, fried chicken, cookies, sugar-saturated soft drinks, potato chips."

Disney-style junk-food may not have changed much over the last 50 years, but we Americans are eating more of it than ever. Over the last 35 years, the average American woman’s daily intake of calories rose from 1,542 to 1,877 and the average American man’s from 2,450 to 2618.

Not surprisingly, therefore, the "fats" are getting fatter. "In 1963," Beers notes, "the Center for Disease Control reported that 44.8 percent of the American population was overweight. In 2000, that number had risen to 65.2 percent. In 1963, 13 percent of Americans were obese; in 2000 it was 31 percent. In 1970, 4.5 percent of American children were overweight; in 2002 it was 15.8 percent."

And yet, we continue to consume ever-growing quantities of everything – from Big Macs to SUVs to home-equity loans. Clearly, we cannot help ourselves. Nothing short of an AA-style "intervention" could halt our over-consumption. But even as we try to gorge ourselves, we cannot possibly keep up with Chinese consumption trends.

In 2002, for example, the US consumed more copper than any other nation. China now claims that distinction. Then, last year, China consumed twice as much steel as the U.S. The Chinese have also become conspicuously large oil consumers. World oil demand since 1988 is up 25%, but Chinese demand has rocketed 175% over the same time frame. Looked at another way, China’s absolute consumption has risen more than the US since 1998. American consumption grew by 3.08 million barrels a day while China’s grew by 3.98 million barrels a day. China now consumes more oil than Japan, 7.6% of the world total compared with 7.4% for the world’s second largest economy.

The increasingly prosperous Asian nation has also become a voracious consumer of agricultural products. While we add calories to our diets, the Chinese are adding protein, a phenomenon that drives demand for poultry products, for example. The recent successes of Yum! Brands (NYSE: YUM) illustrates the trend.

"Thanks partly to China," the Economist notes, "Yum! is making about two-fifths of its operating profits outside America, up from one-fifth in 1998…With 1,378 KFC restaurants in China, and 201 Pizza Huts at mid-2005, Yum! owns two of the best-known brand names in the world’s most populous market." Business is booming, which is why the company is on pace to open about one new restaurant per DAY in China.

The feeding (and fattening) of America over the last three decades contributed mightily to the prosperity of companies like McDonalds. History is in the process of repeating itself: the feeding (and fattening) of China will provide opportunities for innumerable companies. The appetite of 1.3 billion individuals is not easily satisfied.

Did You Notice…?By Addison Wiggin

To Americans, the suggestion that the dollar is losing value is unthinkable — unpatriotic even. The problem is found not only in the lack of understanding about the nature of wealth and investments used to create and sustain it; in America’s money culture, policy makers and economists make no distinction between wealth created through saving and investment in the real economy, versus "wealth" created in the markets through asset bubbles, brought about by credit policies. Even when suggestions about the flaw in this thinking arise, the distraction of consumerism has created a type of attention deficit disorder. We’re trying to tell people to lose weight while meeting with them for lunch at the soda fountain.

We not only spend at a high level; we also prefer accumulating wealth on the same fast track. Traditionally, economists recognized that it took time to build an estate. People and countries could build wealth slowly, but today the new approach requires that a state find ways to increase the market value of its productive assets. [In such a strategy] an economic policy that aims to achieve growth by wealth creation therefore does not attempt to increase the production of goods and services, except as a secondary objective.

This a perfect description of the economic thinking that rules in America today, not only in corporations and the financial markets, but even among policy makers, elevating wealth creation— that is, bubble creation—to the ultimate in economic wisdom. The asset bubbles in recent years—in stocks, bonds, and housing—were primary elements of economic growth. Considering, though, the lopsided effect on consumer spending and borrowing, is this a reasonable and sustainable policy? Should it be encouraged? It works in the short run from the demand side, but where does it lead? Just as mercantilism in eighteenth-century Europe ultimately fell under its own weight, the modern economic trend toward house-of-cards wealth creation may become a twenty-first-century version of past lessons not fully learned or appreciated.

America’s grinding credit machine makes all the difference in economic growth and wealth creation between our country and the rest of the world. Lately, China is overtaking the United States in so many ways, but ironically, based on a more tangible economic viewpoint.

It may prove to be the great irony of the twenty-first century that the Chinese—once viewed as the most puristic of the Communist regimes, rabidly anticapitalist at the height of their fervor—may turn out to be the most successful model of worldwide capitalism. (On a recent trip to China, I had a good chuckle while touring the Forbidden Palace in Beijing. The tour was sponsored by Nestlé, and the plaques that explained where the concubines slept had American Express logos in the lower-right corners.)

China’s growth is investment-driven, with a capital investment rate close to 38 percent of GDP. By U.S. standards, that is very, very high.

About Eric Fry:

Eric J. Fry, Agora Financial’s Editorial Director, has been a specialist in international equities for nearly two decades. He was a professional portfolio manager for more than 10 years, specializing in international investment strategies and short-selling. Following his successes in professional money management, Mr. Fry joined the Wall Street-based publishing operations of James Grant, editor of the prestigious Grant’s Interest Rate Observer. Working alongside Grant, Mr. Fry produced Grant’s International and Apogee Research, institutional research products dedicated to international investment opportunities and short selling.

Mr. Fry subsequently joined Agora Inc., as Editorial Director. In this role, Mr. Fry supervises the editorial and research processes of numerous investment letters and services. Mr. Fry also publishes investment insights and commentary under his own byline as Editor of The Daily Reckoning. Mr. Fry authored the first comprehensive guide to investing internationally with American Depository Receipts. His views and investment insights have appeared in numerous publications including Time, Barron’s, Wall Street Journal, International Herald Tribune, Business Week, USA Today, Los Angeles Times and Money.